Loss of internet connection brings down internal network?

HI all, I'm at a loss. I have a small biz client that's running a current Xserve, 10.5.8, running a Windows PDC for XP/Vista clients, connected to internet via cable modem. The server's got a static IP on the external interface and is running DHCP/DNS on the internal 192.168.2.x subnet. The modem connects directly to the server en0 and en1 connects to an unmanaged Gb switch, which also connects to all 6 client machines. Running Firewall, NAT, DNS, DHCP, Open Directory, AFP, SMB, iCal, FTP, VPN, Web and Mail services. When the internet connection drops for whatever reason, it brings down services on the internal network. Clients can't log in to their machines, sometimes can't access the server. Only when the external network is restored does the internal network return to normalcy. This seems to only happen to large outages, as during the day, the modem apparently drops off from time to time for a few seconds here and there. Perhaps it's not long enough to cause the problem or perhaps something else is going on. The first time it happened was right after the server was installed. Another client on the ISP's WAN somehow ended up with our IP address. Took a while for them to get that resolved, but in the meantime, clients couldn't log in to their computers w/ their network logins. Only the local logins would work. Second time it happened was after a storm and power had gone out. Same issue here... modem was down, so were internal clients. Does anyone have any ideas as to why the external/internal networks are connected like that? Makes no sense to me why that would happen. If the internet's down, it shouldn't matter a hill of beans to the internal network, but it does. Clients should still be able to log in and connect to the server. Thought I'd throw this out there and see if anyone had seen anything similar. Thanks in advance! Jason